Disadvantages of Hiring an Employee Instead of a Company / Contractor

1. Higher Cost - Lower Profits


When hiring an employee, first, consider higher cost spent on labor + equipment + utilities + any benefits, worker's comp or liability insurance. This significantly cuts into the profit margins of a company. Due to such high costs that aren't just monetary, this is why so many companies either down-size or outsource or go out of business  - especially when so many workers demand or prefer working full-time. There are also certain legal risks that most employers don't factor in enough. If a worker trips and falls at your own office, you'd be held liable for not providing a safe working environment, unless it was purely the worker's negligence. The opposite is true for when you hire a company/contractor who has their own office/work space for which they are solely responsible.


Best Alternative: By hiring another firm or having someone work from a remote office, it greatly diminishes employer's liability while maximizing profit margins based on significant savings from not having a full-time employee. Instead, a marketing contractor or marketing company absorbs part of your cost of production and overhead/operation.


This makes it a WIN-WIN for both - the employer and the contracting firm since the contracting firm would not be forced to be working out of an employer's office as they'd already have a professionally optimized work space that would be considered as if an "extension" of the employer's office space but only with minimal liability-cost and a different company name for reputation protection...


2. Lack of Skills - Lack of Resources


More often than not a typical job seeker shows up without substantial skill-sets that would render a more diverse labor capacity to be a more autonomous worker. Every employer loves to have a knowledgeable, skillful worker who can work independently without being micromanaged. Unfortunately, in most work places it is not the case. It's not uncommon for a job-seeker to show up with no business connections, insufficient experience and no valuable resources to bring to the table.


Best Alternative: Professional contractor or a competent firm would already have  sufficient resources, pre-established business networks (to grow the business), more skilled/more talented labor with more hands-on experience and better quality of work in general. This is called "pre-trained labor" that you don't have to train too much unlike an in-house worker. This results in more labor efficiency, more productivity and ultimately higher gains from having someone who understands autonomous synergy and thus can still work well with your team even from another office. 


3. Slow Business Development


Ever tried hiring an employee only to realize that they have zero enthusiasm for making your company more successful? - Those types of employees tend NOT to care about your company and would rather care more about paying their bills. Of course, there is nothing wrong with trying to be able to afford a stable living so you can take care of your family and your lifestyle. But when it comes to giving it 100% quality effort and to have sheer dedication to consciously care about your company's progress, company mission and business development - it takes a special worker OR another company that has a vested interest in making your business more prosperous through the most effective strategies.


Best Alternative: In comparison with other types of work, business development requires a much higher intellectual capacity and more labor-support + funding leverage with the most effective ideas mapped out by the smartest business strategies that create short-term and long-term profitability along with high value proposition. Someone who has experience with these aspects of building a business would be be able to assist and consult on the best measures toward a faster, wiser business development process. Generally, those aspects are best to be handled in collaboration with an outside company (like a strategic alliance) so that both firms can potentially grow together.


As companies grow and develop together, they can cross-leverage mutual resources and even capital to attain more economic efficiency and prosperity. Unlike an employee who is not employed at will and is subjected to employment protection laws, a company/business has greater incentives to perform at a higher quality level in order to be renewed for more long-term collaborations and contracts leading toward mutual success.


4.  Constricted Ideas - No Innovation


As we all know, once the company runs out of new ideas/stops innovating, competition can then easily surpass them in quality, affordability, viability and market dominance. This can easily make any business go extinct unless only best ideas get deployed in order to improve and adapt. In most companies, it is almost taboo to come up with something original and something profitable since these kinds of decisions are normally made at the very top executive level. If some employee dared to come up with something more advanced, more lucrative and more practical, it may get resented by the upper management because the ideas are not coming from the management itself, therefore creating a "superiority complex" in the constricted work-force.


Best Alternative: Unlike typical employees, certain companies and contractors not only have more innovative free flow of ideas but they may also have investor resources and extra PR clout to launch newer products/services and ventures. Innovation is not an easy skill to find; chances are, you will not find the next pioneer/innovator unless you expand your horizons to utilize other company's connections and valuable network resources. Chances are, they may know someone whom you'd like to employ for their innovation skills & experience. In addition to being "innovation goldmines", companies can connect you with talented/skilled labor that you need for your staffing/recruiting & team-building purposes.


Let's say there is some company that will have the best, most lucrative ventures on the market.. Under the employee agreement, workers naturally cannot do too much innovation due to a legally restricted scope of employment that defines their daily tasks being assigned by the manager. However, a company-contractor has the means to be very innovative as the scope of employment is mainly defined by what the contract-agreement stipulates PLUS it tends to be a lot more expansive in terms of creativity and more adjustable for negotiations... That means companies can theoretically form joint ventures, alliances, collaborations, partnerships, equity deals, revenue and profit-sharing, investment deals, extra commissions, residuals, royalties, etc...


5. Office Politics - Work Inefficiency


It's mainly due to complex office politics and the time people spend socializing and playing up to their supervisors in order to keep their job. In addition to their daily work-load, workers would also have to keep thinking about the political strategies to win favoritism and job security - all of which can create a more stressful environment with unnecessary distractions and mindless games (let alone those people who are difficult to work with)... Some managers allow their longer-distance workers to telecommute, which overall reduces stress and social friction, therefore resulting in positive efforts allocated toward more work. Basically, it all comes down to positive VS negative work environment that can impact individual's work ethic and productive efficiency.


Best Alternative: This is exactly where 'work from home' actually wins out over the work in communal office. Studies have proven that assuming someone has a decent home office environment, those workers scored marginally higher on productivity than those working from the corporate office. Surprisingly, home office workers also scored higher on health tests, confirming that it was likely due to less sedentary lifestyle, less stress and less fast food.


If not work from home, the other best alternative is to have a competent contractor or a professional marketing firm somewhere local in the same city or at least in the same country (without outsourcing to overseas). This way, there is still control and assurance from an employer's stance while at the same time it would boost work efficiency focus based on not caving into culture clashes and complex corporate politics.


Bottom Line: Hiring a competent company and/or a professional contractor (who is not an employee being forced to work in-house) IS a wiser choice that will result in a more successful business operation powered by higher productivity, better efficiency, higher profitability / lower cost, low liability/risk, more flexibility, more labor autonomy / less micromanagement, better quality of work + innovation and finally more mutual synergy...


Post Date: Jul 07, 2020 - Original Publishing date: Aug 30, 2016

Written by: Yuri Sire - www.linkedin.com/in/yurisprofile

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